4.3 THE START OF THE WHEAT TRADE

Meanwhile, during the fall of 1838 in Chicago, the first real harvest by the new farmers in the outlying areas and along the canal route, produced a small surplus of grain that was available for export. The reports by the troops who had fought in the Black Hawk War as they returned to their eastern homes had piqued the interests of their farmer neighbors as well as recently arrived immigrants. Faced with the facts that their methods were depleating their soil of nutrients but that the value of their land was increasing due to the population explosion and the corresponding growing demand for livestock grazing pasture, many eastern farmers sold their property and moved to the NorthWest in order to make a better living on the virgin prairie. Charles Walker, a successful merchant originally from Burlington Flats in Otsego County, NY, had with his brother, Almand, established in 1836 C. & A. Walker, a “forwarding house” on S. Water Street that enjoyed a brisk trade in Chicago in farm implements imported from the East that he exchanged for grain, meat, and hides from the area’s farmers. C. & A. Walker would “forward” this produce to the East when they had acumulated a sufficient amount to fill a boat. Walker made his first shipment of NorthWestern wheat in 1838 when he shipped seventy-eight bushels of the surplus wheat to Buffalo on the steamer Great Western. The timing of the formation of Chicago’s first grain surplus could not have been more propitious. Wholesale commodity prices were to rise from a post-Panic low in September 1837 to a high in February 1839 as a result primarily from two successive wheat crop failures in Great Britain during 1838 and 1839 that had helped to encourage American exports and correspondingly reduce the country’s growing deficit in its balance of payments.

A “Prairie Schooner” approaching Chicago along a “plank road.” (Heise and Edgerton, *Chicago: Center for Enterprise*)

The following harvest of 1839 brought Chicago’s first significant surplus in wheat for export to the East. The wheat brought to Chicago by farmers in their wagons, or “Prairie Schooners” (from a distance across the flat prairie, their canvas covers resembled the sails of a ship), was required to be collected, stored, and eventually transferred to a lake vessel to be shipped along the lake route to Buffalo before winter shut down all lake traffic. The river cities of Cincinnati and St. Louis were subject to seasonal river levels, that at times during dry seasons, left boats docked a significant distance from the storage/loading facilities higher up the river’s levee. This meant that bags of wheat had to be moved by hand twice: first, when it was unloaded from the farmer’s wagon to be stored, and again when they were carried down the river bank to be loaded on a boat. In Chicago, however, the slow-moving river held a constant level, which allowed a different, more efficient system of storing wheat to be developed that eventually reduced shipping costs at Chicago significantly. George Dole had built Newberry & Dole’s two-story warehouse on the north side of the river, where Oliver Newberry’s younger brother Walter owned land and resided. The farmer’s wheat was first hoisted to the upper story of the warehouse with rope and pulley by “Irish power,” where it was stored not by the bag it had come in, but by being poured into bins with the wheat of other farmers. The problem of efficiently loading a ship was solved by a human bucket brigade that transferred the grain from the storage bins to a chute fixed in one of the upper windows. The chute gradually narrowed until it reached the deck of the ship, where the rivulet of wheat was discharged into boxes holding four bushels. Here it was weighed and then transferred into the hold of the vessel. On October 8, 1839, Newberry & Dole shipped 3678 bushels of wheat on the Osceola.

The *Osceola* taking on wheat (note the chute from the upper floor) at Newberry & Dole’s Warehouse, 1839. (Heise and Edgerton, *Chicago: Center for Enterprise*)

There still remained the issue of the transfer of finances from the purchaser of the wheat to the farmer who produced the wheat. While the “forwarding houses” had began the practice of exchanging Eastern manufactured goods for Western wheat, as the surplus wheat began in to increase in volume, these “forwarding agents” were happy to store the wheat, for a charge, until the wheat could be shipped as they themselves did not necessarily need, nor want to buy the wheat when it arrived at their facility. They were primarily “middlemen” or “forwarders,” who transported the wheat to the ultimate buyer, be he located in Buffalo or London:

“As long as wheat fluctuated in price, anyone who owned it for even a short period automatically became a speculator. He could gain or lose money by events that might happen in any far-away corner of the world, and which would be reflected in the demand for and supply of grain. When wheat was bought in the autumn with the intention of shipping it east in the spring, as was the case in Chicago, the speculation could be long and perilous. Ordinarily prices would be higher in April and May than they had been in September and October, but the forwarders could not count on this and, when calculating their profit or loss, would have to include such costs as labor, transportation, insurances and other factors.”

While this process might take over six months while the Great Lakes were frozen, the farmer needed money not only to live on, but also to finance the winter’s and spring’s plantings. George Smith’s sense of timing seemed impeccable, for he had opened his loan office in the summer of 1839, immediately just prior to the first significant wheat harvest. On January 2, 1840, Smith had advertised:

“On advances for Winter wheat 50 cts; Spring wheat 37 cts. and corn 25 cts. per bushel, delivered at the ware house of G. S. Hubbard & Co,. with authority to ship or sell in the spring for account of the owners, subject to the usual charges for storage, insurance and commission and one per ct. per month for advancing. If shipped to the East, payment of proceeds will be made at the place of sale, if desired.”